September , 2020
Covid-19 pauses renewable energy sector growth
21:44 pm

Tushar K. Mahanti


Disruptions in economic activities due to the coronavirus pandemic have exposed the vulnerability of the energy system. The sharp fall in energy demand following lockdowns and the accompanying price volatilities have destabilised the energy system - putting the energy transition process at a risk. It has altered the competitiveness of renewable energy technologies and has reduced incentives for energy efficiency.

Energy transition refers to the energy sector’s shift from fossil-based systems of energy production and consumption including oil, natural gas and coal, to renewable energy sources like wind, solar as well as lithium-ion batteries. The increasing penetration of renewable energy into the energy supply mix, the onset of electrification and improvements in energy storage are all key drivers of the energy transition. India, like most other countries, had an ongoing energy transition, but now the question is: Will Covid-19 create a pause in the transition process or create a shift in the trajectories?  

The World Economic Forum (WEF) in its latest report on energy transition has feared that Covid-19 will compromise the transition to clean energy without an urgent stakeholders’ action as unprecedented disruptions due to the pandemic threaten this transition. India, which has moved up two positions to rank 74th on the global 'Energy Transition Index' of WEF in 2020 with improvements on key parameters like energy security and environmental sustainability, is in a dilemma.

The shift to clean, renewable energy in India has been a priority and the reduction in the prices of green energy along with growing environmental awareness has helped to further this trend. India has committed `24 trillion to the energy sector under the ‘National Infrastructure Pipeline’ to improve energy access and sustainability. The lion’s share of this will be towards renewable energy investments. The sharp fall in GDP and the deceleration in government’s revenue collections following the pandemic have now put question marks about the governments’ ability to invest big money in the energy sector.      

Growth in the renewable energy system

In its 2020 report, the WEF has suggested that India’s energy transition process is largely regulated by the competing imperatives of energy supply security and its environmental ramifications. The transition to renewable energy systems has potential to mitigate vulnerabilities in the energy system but the growing imbalance between demand and supply and the disparities in cost structures are roadblocks to the pace of the process.

Way back in 2015, India announced a short-term target of 175 GW of renewable energy by 2022 - which would not require major grid upgrade or storage. Coal – which accounts for about half of India’s energy sources – was set to be replaced by renewable energy, at least for most of the new electricity.

As the world becomes increasingly concerned with the enormity of the threat posed by environmental pollution, India moved aggressively for clean-energy expansion programmes. The Indian renewable energy sector is the fourth most attractive renewable energy market in the world. India is ranked fourth in wind power, fifth in solar power and fifth in renewable power installed capacity as of 2018.

On the back of a highly conducive policy environment, a steady influx of capital, falling prices and new technologies, India has seen an exponential growth in its renewable energy sector in the past five years. In 2015, the government made its intentions to transition to a lower-emission electricity system clear by declaring an ambitious target. The message was simple; wider and cheaper energy access but at minimal cost to the environment.

The renewable industry responded to the government’s call for climate-compatible growth by aggressively ramping up capacity. The aggregate renewable capacity has more than doubled in the last five years from 38,959 MW in 2015 to 87,669 MW in 2020. This has increased the share of renewable energy in India's total energy mix from 14.2% to 23.6% during the period. Today, with an installed renewable capacity of 88 GW, India is among the top-five clean-energy producers globally.


Renewable energy installed capacity (MW)




% Change

Small hydro








Bio power












Source: Central Electricity Authority, GoI



Share of renewable in total

installed capacity (%)

As on June 30

% Share













Source: Central Electricity Authority, GoI


The capacity installed so far is only a small part of the potential. According to the report of the Central Statistical Office entitled ‘Power Statistics 2019’, less than 8% of the renewable energy potential has been utilised so far. The potential for renewable power generation in the country is estimated at 10,96,081 MW. This includes solar power potential of 7,48,990 MW (68.33%), wind power potential of 3,02,251 MW (27.58%) at 100m hub height, small-hydro power potential of 19749 MW (1.80%), biomass power of 17,536 MW (1.60%), 5000 MW (0.46%) from bagasse-based cogeneration in sugar mills and 2554 MW (0.23%) from waste to energy.

The geographic distribution of the estimated potential of renewable power reveals that Rajasthan has the highest share of about 15% followed by Gujarat with 11% and Maharashtra with 10% share mainly on account of solar power potential.

The growth and the potential prospects of the sector have attracted foreign investors in a big way. FDI inflow in the Indian non-conventional energy sector was $ 9.22 billion between April 2000 and March 2020. More than $42 billion has been invested in India’s renewable energy sector since 2014.

Installed solar capacity rises sharply

Even as the capacity and the generation of total renewable energy increased sharply in recent years, the growth of solar energy was phenomenal. In five years, between 2015 and 2020, the installed capacity of solar power has increased more than nine times against the 125% rise of the sector as a whole. In fact, the solar sector has received wide acceptance globally and by the end of 2019, a huge amount of 629 GW of solar energy capacity was installed across 37 countries.

The logic is simple; the sun provides more than enough energy to meet the whole world’s energy needs and it would not run out anytime soon. Provided that solar power is turned into electricity in an efficient and cost-effective manner, its growth potential is almost unlimited.

To make use of this unending source of power, the government launched the National Solar Mission in 2010. The mission’s objective is to establish India as a global leader in solar energy by creating the policy conditions for solar technology diffusion across the country as quickly as possible. The initial target of the mission is installing 20 GW grid-connected solar power plants by the year 2022. The target now is enhanced to 100 GW by the same year.

Several policy measures were undertaken in the last five years including guidelines for procurement of solar and wind power through tariff-based competitive bidding process, repowering of wind power projects, quality standards for deployment of Solar Photovoltaic (PV) systems and devices, provision of rooftop solar and 10% renewable energy as mandatory under the mission statement and guidelines for development of smart cities, amendments in building bye-laws for mandatory provision of rooftop solar system for new construction or for higher floor area ratio. Also allowing infrastructure status for solar projects, raising tax free solar bonds, providing long tenor loans, incorporating measures in Integrated Power Development Scheme (IPDS) for encouraging distribution companies and introducing net-metering gave an impetus to its growth.

In order to achieve the target of 175 GW of renewable energy by 2022, the government updated the long-term trajectory for renewable purchase obligations (RPO) in June 2018. The RPO makes it a mandate for both discoms and states to purchase a certain percentage of their energy requirements from the renewable sector. According to the updated notification, 8.75% of the power has to be met through the solar system in 2020-21 and 10.75% in 2021-22.


Renewable purchase obligations (%)


Long term trajectory
















Source: Ministry of Power, GoI



According to the concerned department, three solar parks - Kurnool (1000 MW) in Andhra Pradesh, Bhadla-II (680 MW) in Rajasthan and Pavagada (2000 MW) in Karnataka are fully operational. To popularise the use of solar power, the government distributed more than 74 lakh solar lanterns and study lamps. More than 17 lakh home lights have been distributed under the ‘Off-Grid and Decentralised Solar Programme’. Besides, more than 6.80 lakh street lights have been set up in villages and some 2.46 lakh solar PV pumps have been installed in rural areas for irrigation and for drinking water purposes.

These are good moves but the solar sector is facing a number of challenges. For example, solar PV is still not cost competitive enough to compete with other energy generation technologies on the same scale. Adding to the cost are T&D losses (at approximately 40%) making generation through solar energy sources highly unfeasible. Another big challenge is the availability of land; per capita land availability is very low in India and land is a scarce resource. Dedication of land area near substations for exclusive installation of solar cells might have to compete with other necessities that require land.

Funding of initiatives like the National Solar Mission is a constraint given India’s inadequate financing capabilities. The finance ministry has often raised concerns about funding an ambitious scheme like NSM. The falling revenue collection of the government in post-Covid period is feared to enhance the finance department’s concern to allocate funds for this mission. Complexity of subsidy structure and involvement of too many agencies like the Ministry of New and Renewable Power, Indian Renewable Energy Development Agency, the electricity board and the electricity regulatory commission makes the development of the solar PV projects difficult.

Challenges facing the renewable energy sector

The key issues affecting growth of the renewable market in India is low investor sentiment due to delayed or non-payment by discoms to clean energy generators. Distribution companies owed a huge `68.37 billion to renewable energy generators at the end of March 2020. Tata Power Company and Adani Green Energy were the two non-conventional power generators that were owed the highest amounts of `17.42 billion and `12.59 billion, respectively.

And although the government has announced a `90,000 crore liquidity package for discoms to clear dues to generators, this is not going to solve the payment problem as the dues are mounting every month. The outstanding dues of discoms amounted to `1.13 lakh crore at the end of last fiscal. 

The issue of storage of renewable energies is another problem and needs to be addressed urgently. Energy storage technologies provide flexibility in the use of electricity, for both centralised and decentralised supply provisions. Advanced battery technologies could enable rapid deployment of rooftop solar installations, which is currently impacted by the high cost of energy storage solutions.

Land for renewable projects is another key challenge in India as its high cost reflects on the price of electricity. To address this challenge, the government is looking at barren lands for building renewable projects so as to avoid any clash with growing need for agricultural production.

Covid-19 may negate the growth pace of clean energy

Despite challenges, the renewable energy sector in India has been growing steadily over the past years but the impact of the coronavirus pandemic on the economy has now put a serious threat to its growth.  The International Energy Agency (IEA) has predicted that the global renewable installations might fall for the first time in 20 years due to the ongoing coronavirus crisis. Still, it can pick up again, given supportive government policies.

What is encouraging, however, is that while the IEA’s latest Renewable Energy Market Update Report in its outlook for 2020 and 2021 has stated that renewables are not immune to the Covid-19 crisis, it has claimed that they are more resilient than other fuels.

The report also said that the IEA expects net renewable energy capacity to decline by 13% in 2020 - compared to the previous year. It attributed this predicted drop to delays in construction activity brought about by supply chain disruptions, lockdown measures, and other challenges brought about by the Covid-19 outbreak.

The report adds that the Indian government’s renewable energy expansion programme, which aims to build 275 GW capacity by 2027, has helped to create an enabling environment for green energy. India has made consistent improvements in moving towards cleaner energy sources since 2015 and is among the emerging centres that have a high demand for technologies in sustainable power generation.

However, there is a risk that this progress in India's transition to clean energy will get negated due to the coronavirus pandemic. The pandemic is likely to lead to a fall in demand, price volatility and there will also be pressure on governments to mitigate socio-economic costs.

Amidst disruptions in growth parameters there is a silver lining too and the report argues that the coronavirus pandemic offers an opportunity to consider unorthodox intervention in the energy markets and global collaboration to support a recovery that accelerates the energy transition once the acute crisis subsides.

Echoing the same sentiment KV Kamath, President, New Development Bank — also known as the BRICS bank — has recently said that India is better placed to turnaround since it can implement renewable energy projects at a lower cost than most countries.



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